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Where to put income tax return

Tryin2betterscore2
Regular Contributor

Where to put income tax return

I'm hoping I get lots of help here.

I'm getting back a couple thousand back and I am trying to make best decision here without regret of where I put the money.

I have a card ending the 0%promo at the end of this month which the apr will be 16%. I have a balance of $5400 with limit of 7300 on that card. And on my other cards bal $4,000/ limit 4500 with 0%interest till September . And bal 2700/ limit 3000 with 0% til August . And another card with bal 7500/limit 8000 with 8%interest.

And My car loan is $11,733... with interest at 6.99% interest.
Value is approximately $8,000 give or take...

Question is: Should I take about $4,000 and put on car note and refinance? Or should I spread it across my credit cards?

I have no idea how to find out what my interest would be on refinancing car loan??
Message 1 of 10
9 REPLIES 9
iced
Valued Contributor

Re: Where to put income tax return

I would say throw it all at the 7500 balance card as it has the highest interest of your debts. That's going to save you the most money in the long run.

 

Edit: I'm going to amend what I said by saying it's good provided you can pay off all of your 0% balances before they expire. If not, you may want to evaluate which of those has the highest interest rate and start tackling that before it kicks in.

Message 2 of 10
DaveInAZ
Senior Contributor

Re: Where to put income tax return

Why in the world would pay down $4k on a 6.99% car loan when you'll soon be paying 16% on that $5400 CC balance, and sounds like you'll be paying similar interest in August & September when the 0% ends???????????????

 

Pay down you're highest interest rate debt first. With your scores you won't refinance that car loan at a much better rate.

 

And besides throwing your money out the window into the hands of greedy bankers carrying those kind of balances on credit cards, you are killing your credit score. A balance 50% or more of credit limit is rated as "Poor" by Fico scoring, and a balance 75% or more as "Very Poor". You are carrying 94% of CL on that 7500/8000 CL, 90% on that 2700/3000 CL, and 89% on that 4000/4500CL. That's probably costing your credit score 40-50 points.

 

"Friendly and Supportive" is our motto here at MyFico, but some times you gotta tell it straight: 0% promo doesn't mean "free money", tomorrow and the end of that 0% comes sooner than you think. You are clearly living beyond your means and headed for trouble if you don't put yourself on a strict budget cutting back on unnecessary spending and pay down that credit card debt.

Message 3 of 10
Benmarkley3
Regular Contributor

Re: Where to put income tax return

Pay down highest interest credit cards first. You need a thing called a budget. Credit cards are meant to PIF. It isn’t free money. You borrowed well beyond your means. It may come off as mean but maxing out credit cards is about as dumb as it gets. Live within your means. Tackle the highest interest credit cards first. You can work you way out of this debt. You’ll feel great when you do.



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Message 4 of 10
Kree
Established Contributor

Re: Where to put income tax return


@DaveInAZwrote:

Why in the world would pay down $4k on a 6.99% car loan when you'll soon be paying 16% on that $5400 CC balance, and sounds like you'll be paying similar interest in August & September when the 0% ends???????????????

 


I can think of one reason to pay down part of  the car loan. If OP does not have gap insurance, and does not think his finances can support a new autoloan while still paying off the remainder of this one, or can't roll the negative equity into a new car loan.

 

I'm of the opinion that emergencies outweigh interest. But that is just one perspective.

Message 5 of 10
iced
Valued Contributor

Re: Where to put income tax return


@Kreewrote:

@DaveInAZwrote:

Why in the world would pay down $4k on a 6.99% car loan when you'll soon be paying 16% on that $5400 CC balance, and sounds like you'll be paying similar interest in August & September when the 0% ends???????????????

 


I can think of one reason to pay down part of  the car loan. If OP does not have gap insurance, and does not think his finances can support a new autoloan while still paying off the remainder of this one, or can't roll the negative equity into a new car loan.

 

I'm of the opinion that emergencies outweigh interest. But that is just one perspective.


One could also argue that while emergencies outweigh interest, accepting a guaranteed pain (in this case, high interest) over the possibility of another unlikely one (car failure) is not the wisest choice. No matter where the OP puts the money, if such an emergency arose, the situation would be difficult, regardless of whether the current auto loan was upside-down or not.

Message 6 of 10
Tryin2betterscore2
Regular Contributor

Re: Where to put income tax return

Yes, I will be throwing the money down on high interest cards and work my way from there.

I do have a gap on my car which makes me upside down on it. My payment is 334 a month and I was thinking if I could refinance it and make that payment lower that I could take that extra money and throw it at the credit cards.

I did get in a bind and was using cards to pay bills (cable, phone, car Insurance) and groceries for myself and 2 dependents. I had limited money on certain weeks of month like when house payment (500)and car payment (334) was due.. (I admit to using cards to get me by during those weeks, which was wrong idea...)I do know this. And I am trying to dig myself out of that ditch.

I have made decisions to drop my TV bill and go a cheaper route with that which will save me approx 60 a month. And I am looking into other ways to save.
I live in a small country rural area where there is very little opportunity here (it sucks). My options are extremely limited on lots of things.

Thanks for input everyone.
Message 7 of 10
DaveInAZ
Senior Contributor

Re: Where to put income tax return


@Tryin2betterscore2wrote:
Yes, I will be throwing the money down on high interest cards and work my way from there.

I do have a gap on my car which makes me upside down on it. My payment is 334 a month and I was thinking if I could refinance it and make that payment lower that I could take that extra money and throw it at the credit cards.

I did get in a bind and was using cards to pay bills (cable, phone, car Insurance) and groceries for myself and 2 dependents. I had limited money on certain weeks of month like when house payment (500)and car payment (334) was due.. (I admit to using cards to get me by during those weeks, which was wrong idea...)I do know this. And I am trying to dig myself out of that ditch.

I have made decisions to drop my TV bill and go a cheaper route with that which will save me approx 60 a month. And I am looking into other ways to save.
I live in a small country rural area where there is very little opportunity here (it sucks). My options are extremely limited on lots of things.

Thanks for input everyone.

Hi, I also live in a small rural area and know what you mean, but I'm semi retired so I'm not so dependent on opportunities. Some suggestions:

You can ask lenders to change payment due dates so they're not so bunched up together. House payment can rarely be changed, but insurance & utilities will usually work with you on changing due dates, and think every credit card I have lets me change the due dates.

 

TV: I ditched satellite TV years ago when they kept raising the rates. But that doesn't mean you have to do without TV - for less than the cost of 1 month of satellite I put up an outdoor antenna that gets me 15 broadcast stations from Tucson, 50 miles away. Check TVfool.com to see what stations you can get by antenna. You might also consider internet streaming video, Sling is $20/mo. with a bunch of channels, no contract, no setup fees. I use them for a few months in the fall for college football on ESPN, then cancel & say "see you next year".

 

Cell phone: Those unlimited talk plans are usually big rip offs. Granted I don't talk on mine that much, but I use Tracfone pre-paid. $20 gets me 3 months service with 180 minutes, 180 text, 180mb of data. Unused talk.text/data carry over and I rarely use their over priced talk minutes. Download the free Google Voice app, may be only on Android. It gives a free phone # and a ton of free talk time. When you make a call it pops up & asks if you want to use Goggle Voice or your phone's minutes. On my home internet it's free, away from home it uses data, which is still much cheaper than talk minutes.

 

Groceries: Don't let false pride get in your way, you have 2 dependents relying on you: Have you checked if you qualify for SNAP (food stamps)? Whether or not you qualify, there's probably a food bank in your area than can help supplement your grocery needs. I volunteer at our local food bank and appreciate those who come in for food because they make me feel good, neighbors helping neighbors.

 

Finally, if you're getting a couple thousand in tax refund you're letting them withhold too much tax and you want to adjust your W-4 form with your employer and claim more dependents so they withhold less tax. While it's always nice to get a nice big tax refund, an interest free loan to the government is a pretty bad investment, and with them withholding less tax you'll have more money to meet your monthly bills. 

Message 8 of 10
CreditCustomer
Established Member

Re: Where to put income tax return


@DaveInAZwrote:

Why in the world would pay down $4k on a 6.99% car loan when you'll soon be paying 16% on that $5400 CC balance, and sounds like you'll be paying similar interest in August & September when the 0% ends???????????????

 

Pay down you're highest interest rate debt first. With your scores you won't refinance that car loan at a much better rate.

 

And besides throwing your money out the window into the hands of greedy bankers carrying those kind of balances on credit cards, you are killing your credit score. A balance 50% or more of credit limit is rated as "Poor" by Fico scoring, and a balance 75% or more as "Very Poor". You are carrying 94% of CL on that 7500/8000 CL, 90% on that 2700/3000 CL, and 89% on that 4000/4500CL. That's probably costing your credit score 40-50 points.

 

"Friendly and Supportive" is our motto here at MyFico, but some times you gotta tell it straight: 0% promo doesn't mean "free money", tomorrow and the end of that 0% comes sooner than you think. You are clearly living beyond your means and headed for trouble if you don't put yourself on a strict budget cutting back on unnecessary spending and pay down that credit card debt.


In the most friendly and supportive way possible, I completely agree with this post.

Message 9 of 10
Wa3more1
Regular Contributor

Re: Where to put income tax return

Agree with adjusting w4.  The best use of your money is using against highest rate debt. If is personal choice if you want to forgo emergency fund and can sleep at night. It depends on your comfort level

Message 10 of 10
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